Clearwater Paper recently announced plans to build a new tissue machine and related converting equipment for producing premium and ultra-premium grades of private label tissue products at a site adjacent to the company's existing facility in Shelby, North Carolina.
“Clearwater Paper's customers are requiring more premium and ultra-premium products, which we are addressing with the new capacity. These high growth segments have increased 3.5 times faster than the overall tissue market, and we are committed to growing with our strategic customers and positioning ourselves to add new customers,” said Linda K. Massman, President and CEO of Clearwater Paper.
After an extensive analysis of the anticipated market growth, costs and financial returns of a new paper machine, the company will install a 200-inch Valmet NTT tissue machine and related converting equipment. The new tissue machine will produce a variety of high-quality private label premium and ultra-premium bath, paper towel and napkin products.
At full production capacity, the new tissue machine is expected to produce approximately 70,000 tons of tissue products annually.
The estimated cost for the project includes approximately $283 million for the tissue machine, converting equipment and buildings, and approximately $57 million for the purchase and expansion of an existing warehouse that will consolidate all southeastern warehousing in Shelby.
Clearwater Paper projects that the construction of the new facility will be completed in early 2019 and fully operational in 2020.
Assuming the paper machine is fully sold out, it is expected to contribute an incremental $55 to $65 million of EBITDA based on $38 to $48 million of estimated operating income and approximately $17 million of estimated depreciation. The expected internal rate of return (IRR) for this project is 11 percent.
The company expects to fund the project with cash flow from operations and its revolving line of credit.
Clearwater Paper intends to start construction during the second quarter of this year. Converting and warehouse operations are expected to be completed during the second half of 2018, and the tissue machine is expected to be completed during the first quarter of 2019.
